Category Archives: Law Firm Partnership

Equity in a Law Firm Is Not Worth What You Think It Is

A few years ago, my firm got a phone call. A larger firm, based in the Midwest, wanted to buy us. We were told that they had noticed what we were doing and thought it was cool and wanted to talk about what opportunities there may be.

Our firm had a new equity partner.* She was really excited – since she had just come to have equity in the firm, visions of selling her equity stake and living on the beach danced in her head.

Sadly, that’s not really how it works. If you build a tech company and you sell it, you get money to buy a beach house or live the dream of financial independence. If you build a law firm and a larger law firm takes it over, you get a job as a partner in the larger firm.

Like so much of a lawyer’s money life, if you build a law firm, you aren’t building wealth, you’re building income. Income is great if you want to stay on the treadmill; wealth is better if you want to have money that lasts. Lawyers tend to choose income. Which is another reason to think that lawyers tend to be not very bright.

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